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Meet Orbitz: A New And Greatly Improved Travel Portal

(June 2000)

One of the most anticipated launches is about to occur. No, it's not the space shuttle, but it sure could be out of this world. Meet Orbitz, the website formerly known as T2. T2/Orbitz is a very controversial subject within the travel industry, mainly due to the fact that the web site is jointly owned by five airlines, United, Delta, American, Northwest, and Continental, who have poured at least $100 million into its development. Furthermore, two dozen other airlines are expected to participate in the site as well as various car rental companies and hotels. The site is being marketed as an online alternative to the repressive and limited abilities of Expedia and Travelocity. Orbitz aims to be the online travel "Woodstock," if you will, a place where the hostile traveling public can have more freedom and choices to book travel. Will this site give consumers the ultimate buzz for better deals?

Travelocity Terminator?

Even the T2 code name has been the subject of controversy. Apparently, T2 is supposed to stand for Travel 2, or Travelocity 2. However, some travel industry observers believe T2 stands for "Terminator 2," a referral to the Arnold Schwarzenegger movie about a killer android. According to Boston Consulting Group (BCG), creators of the project, the true real code name for the site is Candu, an acronym reflecting the first letters of the names of the site's airline equity investors -- Continental, American, Northwest, Delta, and United. So, what's in the name Orbitz? Company officials said the name alludes to the site's global reach, advanced technology, and the "fun and adventurousness inherent in travel."

Airline "Cartel"

The fact that it is jointly owned by five airlines, which combined carry about 80% of all air passengers, has the American Society of Travel Agents (ASTA) concerned. In February, ASTA filed complaints with the Department of Transportation (DOT) and the Department of Justice (DOJ) urging a review of the site's plans, particularly with regard to possible antitrust infringement. Then, in May, the DOJ said it would investigate whether the Orbitz site, since it is owned by five major airlines, is anticompetitive.

Orbitz is such a hot subject that it was mentioned in last week's congressional hearings on the proposed United Airlines/US Airways merger. It was referred to by one congressman as a future "virtual web cartel" for the airlines. No doubt about it, this endeavor has many people asking questions.

However, company officials dismiss these fears, stating they are just another small Internet start-up which will generate revenue by earning commissions on the sale of airline tickets and other travel products. Furthermore, BCG says that they have been "proactively" providing information to the Justice Department for months on the development of the site, including such documents as contracts. They maintain that even though five airlines have an equity stake in Orbitz, they largely have left the site to develop on its own. However, the airline owners do have representatives on Orbitz's board of directors. Furthermore, BCG maintains that the web site is structured in a way, using electronic firewalls, that prevents the airlines from sharing information on clients and fares.

T2 Judgment Day

In a preview to the press last week, the creators of Orbitz gave a demonstration of the site, which is expected to be up and running in several weeks. What does this site have that other online travel sites don't? Actually, it's not what the site has, but rather what it does. The heart and soul of Orbitz is actually a fare search engine created by another company called ITA Software. The ITA search engine is state-of-the-art technology that uses the Worldspan (owned by United Airlines) computer reservations system (CRS) to find and book fares.

In a controlled demonstration to the press, Orbitz consistently displayed more fares from more airlines than its competitors Travelocity and Expedia. For example, in a search for the lowest fare for one person flying one-way from New York to Chicago on June 30, Orbitz found a fare of $191, compared with $254 on Travelocity and $261 on Expedia. Furthermore, T2 pulled up fares from twelve airlines, whereas Travelocity displayed five, and Expedia only displayed three. The website's creators explained that the fare searches displayed by Travelocity and Expedia are restricted because their search algorithms are limited.

Lastly, Orbitz officials expect the site to have a positive cash flow within twelve to eighteen months of its launch. If Orbitz lives up to all the hype, it's apparent that the consumer will have a new and improved way to book online travel that not only shows more choices but also steps up the competition for the rest of the online travel booking services to improve their product -- a definite win-win for travelers.

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